By JODI SOKOLOWSKI
Buffalo Law Journal

When times are tight economically, the stakes in the Corporate USA legal-representation gambit go even higher.

Many large corporations are narrowing their lists of outside law firms, putting pressure on outside-counsel firms to perform for those clients - and making it even harder for firms to garner new corporate business.

These are just some of the challenges law firms face in representing corporate giants. The secret to attracting and keeping big-name clients in a tough market, says Phillips Lytle LLP partner Morgan Graham, is realizing that corporations are buying legal services in a competitive manner.

"They've become very sophisticated in purchasing services from Internet auctions and RFPs (requests for proposals)," he said of today's corporations. "You have to be mindful to potential threats or inroads to that company by other firms."

HealthNow New York Inc.'s legal counsel, Russell Matuszak, said corporate lawyers should manage client interactions - including those with a company's in-house legal team - with the same care they would their interpersonal communications.

"We expect the same kind of relationship that the average person would get. We're just a corporation," said Matuszak, who is also president of the Niagara Frontier Corporate Counsel Association Inc.

Watch your back

Graham, Phillips Lytle's managing partner from 2001-2007, said the firm represents several Fortune 500 companies, including AT&T, Coach, DuPont, W.R. Grace, KeyBank and Citibank. But it's also aware that law firms lurking in the shadows are waiting to take their place.

"We're cognizant that other law firms want to take our place. Competition is good, but (the market is now) quite competitive," he said.

When the firm held a focus group on its new advertising campaign a couple of years ago, it didn't expect to obtain a new client out of it. But serendipity brought to the focus-group table a Boeing Co. representative.

Even though the aerospace company was looking to downsize its number of outside law firms at that time, that encounter led to Phillips Lytle's being added to Boeing's approved list of New York state outside-counsel firms.

"It just goes to show that (even though) they already have counsel at the table, someone got knocked out," said Rebecca Farbo, Phillip Lytle's marketing director.

Do your homework

Corporations want to be reassured that an outside firm's capabilities and expertise are as great as or greater than its own, said John Zak, a Hodgson Russ partner.

"Sometimes if lawyers don't have an answer yet, they can fudge it, and a layman will not necessarily know it, but (an in-house) lawyer will," he said. "You won't be able to get away with much B.S. with them."

Deborah House is vice president and deputy general counsel for legal resources and strategic initiatives for the Association for Corporate Counsel, which represents 24,000 members in 80 countries. She said a company must make an effort to understand the business and its industry before pitching a proposal.

"Providing counsel on legal issues alone is not sufficient," House said. "It must be provided in a relevant way that's applied to our business operations."

Stay current

Matuszak said that in highly regulated industries such as health insurance, it's crucial that outside counsel have recent experience dealing with regulators.

"It's not just enough to spot issues and laws but how those laws and regulations apply to that corporation," House said. "All clients are not alike, so you have to adapt."

Independent Health Association Inc. keeps the majority of its legal work in-house because its six full-time attorneys "have been doing that for many years and focus their practice on it," said vice president and general counsel Lawrence DiGiulio. The health plan does use Simpson & Simpson PLLC for its intellectual-property work and Joseph Zdarsky, a Zdarsky Sawicki & Agostinelli LLP partner, for litigation work.

"We outsource in those areas where we lack the expertise in-house or we just don't face often enough to ensure our competence," said DiGiulio, secretary of the Niagara Frontier Corporate Counsel Association Inc.

Know all the angles

Keeping the bottom line in the black has become a top priority for U.S. corporations.

"Managing costs is the number-one challenge when it comes to outside counsel, whether it's with a Fortune 25 legal department with over 100 attorneys or a business with one in-house counsel," House said.

Corporations like to see their outside-counsel costs projected with early case assessment and cost-benefit analysis for various scenarios, Graham said. "It has to be in detail and is monitored with regularity," he said.

Which associates and partners are assigned to the case is an important consideration in the budgeting process, because companies "make sure they get value for the cost," said the ACC's House.

"Are the right people being used in a cost-effective and timely way? The trend is to use more senior people because the value is better," she said.

The inside track

Tough times also create challenges for in-house counsel, DiGiulio said. Among the difficulties he cited were keeping up communication with outside counsel, coordinating multiple firms - especially when a case is going to trial - and trying to ensure billing fairness.

Complaints from outside counsel that in-house counsel can be demanding to work with are warranted, he said, but he believes they're also fair.

"We make sure we're reasonable in terms of expectations and in terms of work being performed," Matuszak said.

 

Firms reluctant to name names

While several area law firms are proud to represent Fortune 500 companies, many of them are hesitant to name them. They keep their client lists close to their chest - due to confidentiality reasons and, they say, business etiquette.

Hodgson Russ LLP partner John Zak said asking a paying client to be included in the firm's marketing and public relations is "one more thing you'd rather not do."

"You're essentially bothering them, saying, ‘Please support our marketing efforts,' " he said. "I don't want to be in that position of imposing on them."

He noted that when law firms do name their clients, with permission, they may be handling just a "small slice" of that company's legal work, but that might not be conveyed in an advertisement or newspaper article.

"They hope they'll get full credit for an assumed sophisticated type of legal practice because their clients are large, but what are they doing for that company?" he asked.

Phillips Lytle LLP has no problem naming the Fortune 500 companies, including AT&T, Coach, W.R. Grace, KeyBank and Citibank, it represents.

"We seek permission to use their names," said Rebecca Farbo, the firm's marketing director.

- By Jodi Sokolowski